The management of Furrow Corporation is considering dropping product L07E. Data from the company's budget for the upcoming year appear below: In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:
A) $8,000
B) ($173,000)
C) ($8,000)
D) $173,000

Question

The management of Furrow Corporation is considering dropping product L07E. Data from the company's budget for the upcoming year appear below:  In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:
A) $8,000 
B) ($173,000) 
C) ($8,000) 
D) $173,000

Quizplus · Accepted Answer

11eacbfc_c633_0202_8ffe_3b6c6e1b82af_TB7552_00 The segment margin of $173,000 would be lost if product L07E were dropped.

The Management of Furrow Corporation Is Considering Dropping Product L07E